This invention pertains in general to electronic commerce and in particular to determining taxes to collect in jurisdictions served by an electronic commerce system.
Electronic commerce on the Internet has become commonplace. There are many merchants offering goods and services via web sites on the Internet, and there are an even greater number of customers who purchase the goods and services. In many cases, the electronic commerce transactions involve physical goods. For example, many customers purchase items such as books, compact disks (CDs) and DVDs via the Internet. Customers can also purchase electronic content such as downloadable text, music, and access to web sites that provide news or entertainment stories.
Most electronic commerce sites on the Internet use ad hoc purchasing systems. For example, a web-based music merchant typically has a purchasing system that is valid for only that merchant's family of web sites. Therefore, a customer must establish an account and/or provide payment information to each merchant that the customer patronizes. These separate accounts are inconvenient to both parties. The merchant must maintain a dedicated account management and payment system. The customer must establish separate accounts with numerous merchants.
Due to these inconveniences, customers are often reluctant to purchase items from smaller or relatively unknown merchants. These merchants lack the brand recognition and trust associated with larger, better known merchants. Therefore, the customers hesitate to engage in risky behavior, such as providing credit card numbers, shipping addresses, or other personally-identifiable information to the merchants.
One solution to the problem described above is to provide a centralized point of purchase operated by a trusted entity. The customer provides the personally-identifiable information to only the trusted entity, and the trusted entity performs the purchase transaction on behalf of the merchant. A difficulty with using a centralized point of purchase in this manner is that both the merchant and trusted entity lack information required to complete the transaction. For example, the merchant does not know the customer's address and cannot determine the sales taxes to collect for the purchase. The trusted entity operating the centralized point of purchase, on the other hand, knows the address, but does not necessarily know how to calculate taxes on the items involved in the transaction. As a result, there is a need in the art for an electronic commerce system that allows the trusted entity operating the centralized point of purchase to calculate taxes and other transaction fees without unnecessarily exposing customer information to the merchants.